By Heron Goh, Associate Director, MustaphaRaj Chartered Accountants

Most legal firms in Malaysia will operate under a Partnership or Sole Proprietorship. They are not registered with the Registrar of Businesses and are governed via the professional body being “The Malaysian Bar Council”.

This article aims to address the follies of tax compliance-related matters within the ambit of a partnership and/or a sole proprietorship within the Legal Firms framework. There has been a reasonable amount of confusion from/due to the term “Partner” being used within a legal Firm.

Though registered under a professional body, the framework of the Legal Firm is based on the Laws of Partnership and The Laws of The Income Tax Act 1967 (IRB) and any other law that circumnavigates the running of a business in Malaysia. All laws will apply accordingly/correspondingly.

Definition of a partnership in general
This is a business entity owned by two (2) or more persons and must not exceed twenty (20) persons at any one time. The owners of the Firm may be Malaysian citizens or Permanent Residents (PR). Partnerships are deemed as a legal entity and are not considered a taxable body.

Assessment of Tax
All chargeable income generated by the Partnership will be assessed on the partners individually. This will be done based on their equitable interest in the business via their personal tax submissions (Form B). As mentioned above, the Partnership itself is not subject to any form of taxes and does not pay any income or corporate tax. As such, it may lead to a higher tax exposure on a partner’s personal income tax.

In certain situations, a lower tax exposure/position may occur as divisible current business loss are allowed to be utilised against all other sources of income for the year (e.g. employment income, interest income).

Liabilities in a Partnership
All partners in a partnership are held liable jointly and severally for the debts and liabilities of the practice/business.

In the event judgment is obtained against the partners of the Firm and/or the Firm as a whole, the creditor may commence bankruptcy proceedings against any one partner or all the partners (who were parties to the suit in which the judgment was entered) to claim the debt owned. This may have a direct impact on each partner’s personal wealth. Partnership laws vary from country to country with their own set of regulations – Malaysia is no exception.

Rights of a Partner
In general, a partnership is not allowed to expel any partners unless this has been specifically provided for in the partnership agreement at the point of its establishment.

When Does a Partnership cease to exist?
i) Cessation of business;

ii) Bankruptcy (by any of the partner or the business in general);

iii) Death of owner/ partner;

iv) Pursuant to court order; and

v) Partners leaving or being admitted into the business – (regardless of reasoning).

Pitfalls and the Follies of a Legal Firm

Many unwarranted complications have arisen within Legal Firms due to the lack of understanding on compliance matters by their accountants as well as the partners/lawyers within the Firm.

Situations in a partnership leading to non-compliance
Equity partners leaving or admitted into the Firm. When a partner leaves / is admitted into a Firm, the original partnership business ceases to exist. A common situation arises when most Legal partnerships will likely retain their existing name (which is accepted by the Bar Council) giving the impression that there is no necessity or rather the ignorance of “ Everything remains the Same”.

What is commonly overlooked is the accounting/tax treatment which has not taken into account the cessation of the business at the point when the equity partner(s) leave or are admitted.

Things that should be addressed
1. The Firm’s accounts must be closed at the point when an equity partner departs or when there is a new admission;

2. A complete disposal of Fixed Assets and a distribution of profits must be made at that point of time under the “Old” firm;

3. The IRB must be informed and a “New” Partnership Tax File (P file) has to be registered, as it is a new business entity regardless of the continuity of using the “Old” Firms name;

4. Tax clearance with/for the “Old” partnership must be made to ensure that tax liabilities from the past business is not brought into the “New” Business. This would also include attending to indirect tax matters (SST/GST);

5. Equity partner(s) arrangement towards profit share.

There must be a level of understanding between the partners towards this arrangement, as more often than not, equity partners tend to have either a fixed and rigid structure or one that is very flexible.

With both arrangements, the rules of engagement for the preparation of the tax computation are different and matters from capital allowance to other direct and indirect expenses will have to be addressed carefully. Please bear in mind that all liabilities are extended on a personal capacity.

What is a Form P
Upon informing and making the application to register a partnership with the IRB, a new P File will be put into place for the new business.

Therefore, it is not unusual that in/within a financial year, Two (2) or more Form P files could/might be submitted to the Inland Revenue depending on the occurrence of departure or admission of an equity partner. The Form P is a statutory declaration of/from the partnership dictating and advising the IRB towards the distributable profit/loss entitlement for each equity partner during the given period of time or financial year.

Each partner would be entitled to receive a Form CP30. This will stipulate the distributable profit to be put to tax or otherwise (similar to the EA- CP8d for employees but based on the profit/losses instead of a salary). In the event the CP30 is reports a loss, the adjusted (tax) business loss may be used to set-off against any other income reported in the individuals’ tax returns for the current year.

As mentioned above, the partnership is not taxable and the equity partners are individually taxed on/in their own personal capacity. Thus, it is for the benefit of all parties to ensure that the above actions are carried out at the point of departure or entry of an equitable partner.

Why?
A partnership could be in a loss position when one departs. However, after one’s departure it could be in a profit position (vice versa). The position of the business will be determined at the cut-off date and not the customary financial year-end.

Income is based on an accrual basis and not on a cash basis. Therefore, monies received may well have been taxed in past years (only collected currently).

The Common Follies by Partners
1. Under the impression that drawings are salary/remuneration when in actual fact Drawings do not affect the profit/loss of a Firm. It merely impacts the Firm’s cash flow; (You are not taxed on Drawings – You are taxed on your profits).

2. “I pay taxes on what I received” when in actual fact it could be a business loss position and there’s no tax to address. Monies taken i.e. drawings could well be monies that have already been subject to tax in the past years.

3. Accepting a simple letter dictating the so-called deemed income for the period/year based on a cash basis when it should be on an accrual basis. This practice is incorrect and may attract heavy penalties for the Firm/Partners.

Equity partners must receive a CP30 while a paid partner should receive a Form EA.

Paid/Salaried Partners
Paid/Salaried partners are partners in name but do not hold any equity in the Firm. The IRB’s standpoint is that they are employees and as such, their remuneration should be subject to Scheduler Tax Deduction (STD).

In the past, many Legal Firms have not adhered to Schedular Tax Deduction for their paid partners. The position taken is that paid partners are partners and equated to them having/being under the same rules as that of an equity partner.

This has resulted in forgetting/overlooking the fact that as they are not business owners (equity partners), they are subject to the Employers Remuneration Rules under the tax guidelines. Other statutory regulatory requirements (e.g. Socso & EPF) may also be compromised unintentionally.

Arguments for the above have always been on the basis that the defense of “Being a partner” which clearly is not the case for tax compliance purposes as they are not equity partners. This is again made complex by the fact that all partners “equitable or paid partners” are held equally responsible for the daily activities of the Firm within the Legal Framework/Rules of Bar Council. A distinctive line must therefore be drawn between equity partners and paid partners to enable a clear understanding of the Firm’s obligation towards STD compliance.

The arrangements made by legal Firms may be legally sound. However, at times due to an oversight of tax compliance requirement(s), these arrangements may cause an accounting nightmare and unnecessary exposure to tax and penalties that may accompany it. The common pitfall is the utilisation of a Chamber system adopted within a partnership. The Chamber system although proven and accepted in the United Kingdom may not be suitable for Malaysian application.

Let us have a basic understanding of a Chambering system.

What is A Chamber System?
“In law, a barrister’s chambers or barristers’ chambers are the rooms used by a barrister or a group of barristers. The singular refers to the use by a sole practitioner whereas the plural refers to a group of barristers who, while acting as sole practitioners, share costs and expenses for office overheads. The concept of barristers’ chambers is commonly thought of as a law firm.” – Source Wikipedia 

Basically, the situation will/may arise when a Partnership is built/structured upon the chamber model. The model proposed may not necessarily accommodate tax compliance fit. More often than not, this is a result of everyone having their own idea of how it could be possible to organize the matters in a way satisfying their wants and needs.

Unfortunately, the foundation and framework for such a Chambering system have yet to be put into place, thus causing a mismatch of tax and regulatory compliance. The lack of understanding of tax administrative/technical procedures encompassing the matters above may lead to an unwanted situation. An example is when a group of lawyers within the same partnership wish to work within the same firm (for Branding purposes). However, the business is being compartmentalised (different divisions having its own P&L).

You cannot be a sole proprietor within a partnership as the Bar council rules prohibit this. It is either a sole proprietor or partnership. Should you take the approach of compartmentalising the legal divisions, all divisions must converge as one (1) Firm resulting in a partnership.

Structuring such a Firm will require due care, taking into consideration tax requirements and having an understanding within the equity and dynamics of the business towards its accounting requirements as well as a proper tax compliant plan to be put into place.

What is legally perfect by contract, may lead to unnecessary misunderstanding and disastrous tax exposure. The issues with a partnership are non-exhaustive and the above is merely a fragment of the problems encountered repeatedly.

For clarification and better understanding, do drop us a note and we shall be happy to assist.

Yours faithfully I remain always,

Heron Goh

The Deadlines to Comply With
Form E (Employer remuneration Form) – 30th March

Form P (Partnership reporting) – 30th June

Form B (Individuals running a business) – 30th June

Form BE (individuals with Employment and no business source of income) – 30th April

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In this article, we provide the most recent updates and insights on the requirements for Malaysian Transfer Pricing Guidelines (MTPG) and its enforcement.

Malaysian Transfer Pricing Guidelines and Its Enforcement
All companies that have related party transactions are required to prepare contemporaneous transfer pricing (TP) documentation based on the Transfer Pricing Guidelines and Regulations issued on 20 July 2012 and updated on 15 July 2017.

Updates of Flowchart and Self-Test Kit by IRB on 2 December 2021 
The domestic business enterprise will be relieved from the obligation of preparing transfer pricing (TP) documentation provided that any adjustment by the Inland Revenue Board of Malaysia (IRBM) in tax audits will not result in altering the total tax payable or suffered by the related parties in relation to the controlled transactions.

Which Companies Should Prepare TP Documentation?
Domestic business enterprises which have controlled transactions with related parties outside Malaysia or where one of the parties to the transaction enjoys tax incentives, tax losses or is taxed at a different rate and that any adjustments made may alter the total tax payable should prepare contemporaneous TP documentation.

Contemporaneous Transfer Pricing Documentation refers to documentation brought into existence:
a) When a person develops or implements any controlled transaction
b) Where the controlled transaction is reviewed and there are material changes
c) Documentation shall be updated before the due date upon submission of relevant Return Form

Threshold Requirement to Prepare TP Documentation
Business Enterprises that have (i) a turnover of more than RM25 million and related party transactions exceeding RM15 million per annum; or (ii) companies (non–financial institutions) who provide financial assistance to related parties exceeding RM50 million per annum are required to prepare full TP documentation.

Full Transfer Pricing Requirements:

♦ Organisational and ownership structure
♦ Nature of the business or industry and market conditions
♦ Details of the related party transaction
♦ Pricing policies
♦ Function and risk analysis
♦ Application of TP methodology
♦ Benchmarking analysis
♦ Any other information, data or document considered relevant to determine an arm’s length price

Business enterprises that do not meet the above thresholds will be required to prepare Limited TP documentation (LTPD) to support their related party transactions. LTPD comprises Organisation Structure, Controlled Transactions and Pricing Policies.

Associated /Controlled – Defined in TP Guidelines Chapter I Para 5.2:
Two companies are associated companies with respect to each other if one of the companies participates directly or indirectly in the management, control or capital of the other company; or the same persons participate directly or indirectly in the management, control or capital of both companies.

Associated / Controlled – Defined in Income Tax Act 1967 (the “ACT”)
According to “S139. (1)(a) of the ACT, a person shall be taken to have control of a company, if he exercises or is able to exercise or is entitled to acquire control (whether direct or indirect) over the company’s affairs and if he possesses or is entitled to acquire the greater part of the share capital or voting power in the company.

S139.(6) of the ACT explains that all the rights and powers of any company of which a person has, or he and associates of his have are considered as Associated /Controlled.

“Associated” is further explained in S139. (7) (a) of the ACT as: a person in any of the following relationships to that person, such as husband or wife, parent or remoter forebear, child or remoter issue, brother, sister and partner.

Associated / Controlled – Legislative Updates:
Before 1 Jan 2019 – S140 A(5) + S139 of the ACT
Controlled more than 50% share capital or voting power + S139 of the ACT

From 1 Jan 2019 onwards – S140 A(5) + S139 of the ACT
Controlled more than 50% share capital or voting power + S139 of the ACT

-OR-

S140 A(5A) + S139 of the ACT
Controlled more than 20% share capital + (a) or (b) or (c) + S139 of the ACT
(a) – control over intellectual property, or
(b) – control over business activity, or
(c) – control over management.

Transfer Pricing Explained

Transfer Pricing is a Pricing System for related–party transactions or generally refers to intercompany pricing arrangements for the transfer of goods, services or intangibles between associated parties where at least one party is assessable or chargeable to tax in Malaysia.

TP should ideally not be different from the prevailing market price that would be reflected in a transaction between the independent parties.

This applies to Cross Border and Domestic related parties transactions:
1) Buy/ Sell of Goods or Property – raw materials, semi -finishes, finishes goods, property, plant & equipment, intangible such as trademark and know-how.
2) Buy/Sell of Services –management services, administrative services, technical & support services, marketing and distribution services.
3) Intragroup financing ( financial assistance) – loan, interest-bearing trade credit, advances or debt and provision of a guarantee.

The TP documentation is to support that related party transactions are performed based on the arm’s length principle.

Arm’s Length Principle
Section 140 of the Income Tax Act 1967 (ITA) empowers the Director-General of Inland Revenue (DGIR) to disregard certain transactions which are believed to have the direct or indirect effect of altering the incidence of tax.

Section 140 allows the DGIR to disregard transactions believed not to be at arm’s length and make the necessary adjustments to revise or impose tax liability on the persons concerned.

Thus, this section requires taxpayers to determine and apply the arm’s length price on any controlled transactions.

Determination of Arm’s Length Price
The determination of an arm’s length price involves the following steps which are interrelated and listed in no particular order:
1) Analysis of transactions and functions
2) Characterization of business
3) Identification of comparable transactions

Arm’s Length Pricing Methodologies 
The following are five (5) prescribed TP methodologies and Benchmarking:
a) Comparable Uncontrolled Price Method -> Price Against Price
b) Resale Price Method -> Gross Margin
c) Cost Plus -> Cost Plus Mark Up
d) Profit Spilt -> Allocation of Profit to Each Party in the Value Chain
e) Transactional Net Margin Method –>Net Operating Margin

The suitability of each method would depend on the facts and circumstances of each category of controlled transactions. However, there must be consistency in the approach for similar products or services over time in relation to the particular enterprise.

Importance of Comparability / Benchmarking Analysis
A comparability /benchmarking analysis is a prerequisite in the application of all transfer pricing methods that conform to the arm’s length principle.

This involves comparing conditions in a controlled transaction with those in an uncontrolled transaction. A controlled transaction in a comparability analysis is the transaction that has been identified as the transaction where pricing may not be at arm’s length.

Comparability/benchmarking analysis supports taxpayers with reliable economic data by comparing the related party transaction with a third party in the same or similar circumstances. This will minimise the risk of TP or Price adjustments as the data contained in the benchmarking analysis will be the basis to defend the taxpayer’s position in front of the IRBM.

For LTPD, no external comparability study is required (other methods such as price list or local benchmarking may be applied.)

Intragroup Services

Intragroup services are services provided by one or more members of a group for the benefit of the other members within the group. In general, no intra-group service should be allowed for the following activities:

Shareholder Activities
Shareholder activity refers to an activity that the parent company performs solely because of its responsibility as a shareholder due to its ownership interest in one or more members of the group.

Duplicative Services
Duplicative services are services performed by a group member that merely duplicates a service that another group member is already performing in-house, or that is being performed by a third party.

Services that Provide Incidental/Passive Association Benefits
This refers to services performed by one member of a group, such as a shareholder or coordinating centre, which relates only to specific group members but incidentally provides a benefit to other members of the group. Such incidental benefits would not warrant a charge to the incidental recipient because the perceived benefit is so indirect.

On-Call Services
If there are exceptional circumstances that require on-call services to be considered as chargeable services, it must be proven that an independent person in comparable circumstances would incur such a charge.

Application Of Arm’s Length Principle For Intragroup Services

In applying the arm’s length principle to intragroup services, taxpayers should consider:
(i) Whether services have been provided; and
(ii) If so, whether the charge for these services is at arm’s length prices

Recent TP Audit Focus

Intra-Group Services

♦ Existence and Benefits test for service recipients.
♦ Duplicative Services test on whether such services are already provided in-house.
♦ Existence of Intangible Properties

Intra-Group Financing

♦ IRB often challenges interest–free financing within the group.
♦ Taxpayers need to apply arm’s length interest rates.

Loss Making Entities

♦ Need to compile quantitative and qualitative supporting documents to justify the loss.
♦ To prove that the effect of adjustment will not alter the total tax payable for the domestic intra-group.
♦ IRBM would expect a TPD with benchmarking study to be performed for multi-national Entities.

Transfer Pricing Audit Framework 2019 was issued on 1 April 2013 and updated on 15 December 2019 and the related TP Penalties are:

♦ Taxpayers who did not prepare a TPD will be fined a penalty rate of 50% of any additional tax payable as a result of TP price adjustment.
♦ If the TPD is prepared and submitted on a timely basis, the penalty rate can be reduced to 30%.
♦ Zero penalty is possible if the taxpayer has a good quality TPD

Malaysian Transfer Pricing Guidelines Effective 1 January 2021:

♦ Penalty of RM20,000 to RM100,000 for failure to submit a TPD upon request by the IRB under new section 113B of the Act.
♦ Surcharge of 5% on any TP adjustments made during an audit.
♦ Expanded scope of the IRBM to disregard transactions under S.140A (3A) and (3B).
♦ Period to submit the TPD has been reduced to 14 days.

Hence it is essential that all companies promptly attend to the requisite of TP requirements, if applicable. If you have questions or require our assistance, please email us at taxservices@mustapharaj.com or contact our Ms. Priya at priya@mustapharaj.com.

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A significant proportion of global leaders are confident that life will return to normal over the next 12 months. But recent data suggests that transformation may be thrust upon them.

According to the most recent KPMG CEO Outlook Pulse Survey, CEOs are split over the extent of long-term change – 24% say their business has changed forever, but 31% predict a complete return to normal later this year.

When polled on downsizing office space, 69% of CEOs were in favour in 2020 however in 2021, only 17% were in favour, while 30% favoured flexible remote work (2-3 days a week).

According to Consultancy firm Gartner’s recent survey of 4,000 employees about their views on hybrid working, there is a disconnect between what CEOs and employees view as flexible working.

The survey shows 75% of executive leaders believe they already operate a flexible culture. However, just 57% of employees agree. Nearly three-quarters of executives believe the business understands how flexible work patterns support employees, but only half of the employees share this view.

According to a report by McKinsey, employers are underestimating how big this disconnect is. As outlined by the KPMG survey, they are confident of a quick return to normal. This false optimism is driving a mass exodus of employees: 40% of workers around the world are considering leaving their jobs before the end of the year.

Employers and employees don’t know exactly what they want the future to look like, but employees certainly want flexible working in some form or another. Post-pandemic, the number of employees wanting a hybrid working approach increased from 30% to 52%, according to McKinsey.

It could take years to get a hybrid working model right. Organisations will need to rebuild their working culture from scratch. It may be necessary to attract and keep the best talent. If one organisation doesn’t go hybrid, its competitors will.

Leaders need to find new etiquette around blended meetings, determine the risks of a two-tier approach to people development, where those who are in the office getting more benefits than those at home, purely on the merit of being more visible. Ensuring equity for all staff is one of the major questions of hybrid working.

Organisations will need to develop clear strategies around technology and tools to manage hybrid workforce. Moving to a more digital workplace will create opportunities – better insights using data analytics, improved decision making, new skills and talent. Although, it also comes with challenges such as addressing cyber security risks and the dilemma about people management and employee monitoring.

Organisations can learn from some pioneers that have had a head start and know where the critical considerations and complexities lie. This includes an organisation’s approach to the finance function – working remotely has already pushed much of the function onto the cloud, and provided teams with deeper, real-time data to work with.

ICAEW’s series on hybrid working and the future of work takes a closer look at some of the issues and opportunities that arise in the emerging hybrid workplace, and how that might develop in the longer term.

This article is a summary of the original publication that appeared on ICAEW Insights.

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Based on the Transfer Pricing Guidelines 2012 (updated in 2017) and the Transfer Pricing Regulations 2012, all companies that have related party transactions are required to prepare contemporaneous documentation.

With effect from 1^st January 2021, failure to prepare transfer pricing (TP) documentation on a contemporaneous basis will give rise to a penalty of between RM20,000 to RM100,000 and a prison term for 6 months if criminal prosecution is taken. If no criminal prosecution is taken, then the penalty of between RM20,000 to RM100,000 will be applied.

The time frame for furnishing the TP documents to the Inland Revenue Board (IRB) is within 14 days upon the request being made.

Although the TP Guidelines mention that companies which have (i) a turnover of more than RM25 million and related party transactions exceeding RM15 million; or (ii) companies (non – banks) who provide financial assistance to related parties exceeding RM50 million are required to prepare full TP documentation, companies that do not meet the above thresholds are also required to prepare the following limited TP documentation to support the related party transactions:

	Organisation structure of the company.
	Details of the controlled or related party transactions carried out in the year and the basis of the determination of an arm’s length transfer price for these transactions. This could be done through an external benchmarking exercise where comparable transactions of other companies (that do not have related party transactions) are required to be benchmarked against the existing company to arrive at a conclusion that the pricing being charged is within the arm’s length range of charges.
	Details of the pricing policies and explanation on how the policy and pricing was adopted. This is linked to a certain extent to point (2) above.

Prior to 1^st January 2021, companies that are loss making and enjoying tax incentives will not be in a tax payable position even if any TP adjustments are made, as the losses or tax incentives will shelter the adjustment made. However, with the change in the legislation, these companies will have to pay a surcharge of 5% of the TP adjustment amount even though the company is not in a tax payable position.Pursuant to the 2019 TP Audit Framework, a penalty of 50% will apply if tax payer did not prepare the TP documentation and is subject to a TP audit. If tax payer prepared TP documentation but it did not comply with the TP Guidelines, the penalty is 30%. These penalties will be on the additional tax payable in respect of any adjustment the IRB makes to the transfer price. A penalty of between RM20,000 to RM100,000 will also apply for not having adequate documentation to support the pricing of related party transactions.

Therefore it is essential that all companies review their tax position in relation to related party transactions as the loss position or enjoyment of a tax incentive will not shelter them from the 5% surcharge.

Finally, please take note that the filing of the company’s statutory tax return (Form C) requires a taxpayer or the tax agent (if they are signing the form on behalf of the client) to indicate on the tax return by way of a tick (√) in a box whether the company has prepared the TP documentation in accordance with the requirements of the Transfer Pricing Regulations:

	If the company does not tick the box, this will result in the IRB taking action against the company for non – compliance and imposing a fine of RM20,000 to RM100,000 for the non – preparation of the TP documentation.
	On the other hand, if the company places a tick in the box and does not prepare the TP documentation, when the IRB request for the transfer pricing documentation and the company is not able to produce the TP documentation within 14 days from the request being made, then the IRB will impose a fine of a similar amount as indicated above.
	The IRB can also propose adjustments to the transfer price and impose penalties.

If you have questions or require our assistance, please email us at taxservices@mustapharaj.com or contact our Ms. Priya at priya@mustapharaj.com.As the above changes will have a significant impact on the company, please promptly attend to the requisite TP requirements, if applicable.

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We are nearing the end of the financial year and as it starts to get busier, you can trust our team at MustaphaRaj Chartered Accountants to manage and close your books for the financial year-end. As we get your finances in order, it’s also the best opportunity for you to start running your business on the cloud.

MustaphaRaj is a member firm of the Malaysian Institute of Accountants and has been in practice for more than 20 years. We have a staff strength of approximately 60 and our group of companies offer services in many areas such as Accounting, Taxation, Audit and Assurance, Insolvency and Corporate Restructuring. Supported by a well-skilled and highly experienced group of individuals and a strong international network of expertise, we offer many advantages in dealing with local or global conditions, in various industries.

Xero is a cloud-based accounting software platform designed to give small businesses and their advisors access to real-time financial data anytime, anywhere, on any device. With over 2 million subscribers in more than 180 countries, Xero integrates with 800+ third-party apps and connects to 200+ banks and other financial partners. MustaphaRaj was recognized as Finalist for Malaysia Partner of the Year for Xero Awards 2020. As a Xero Gold Partner, we have fully utilized Xero in our practice to provide accounting and advisory services for all our clients.

How can Xero benefit your business?

Cloud accounting software is a wise investment – it gives you a better overview of your finances and speeds up your business. Here are just some reasons why you should start thinking about making the move to cloud accounting software in the new financial year:

Do business from anywhere, on any device – It’s easy to access all your data and Xero tools from anywhere – all you need is an internet connection. With Xero’s mobile app, keep all your essentials like invoicing and payroll at your fingertips.

Feel confident in your numbers – With all your data stored safely and in one place, it’s easy to get a snapshot of how your business is tracking with up-to-date financial information available at all times.

Multi-user access available – This makes it easy for you to collaborate online with us. No more waiting for our team to send over an email or spreadsheet containing your financial information as you will be able to gain an overview of your current financial position on Xero anytime.

World-class security and total control of your data – The cloud is one of the most secure ways to store information because no data exists locally – it’s all online and protected by powerful encryption. As your data is always backed up in the cloud, you can continue to run your business even in unprecedented times including natural disasters.

Our team is experienced and equipped with the tools to help you migrate your financial data from the existing software to Xero. If you are keen to learn more about cloud accounting, please reach out to our team and we will be happy to assist you.

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If you want your business to work smarter and faster, cloud accounting software is a wise investment. Working in the cloud will give you a better overview of your finances, and speed up your business.

What is this thing called the cloud?

Think about when you use internet banking. Every time you access your bank data, you’re using the cloud. The cloud makes data and software accessible online anytime, anywhere, from any device. The hard drive on your computer or laptop is no longer the central hub.

What is cloud accounting?

In the case of cloud accounting, you keep your business books online. That includes records of income and expenses, and assets and liabilities. The information is encrypted, much like a bank’s, so only people with the login can view the data. Businesses started using cloud accounting software – also known as online accounting software – in the early 2000s. Most systems come with tools for quoting, invoicing, managing bills and more. Learn more about what cloud accounting software can do.

How cloud accounting works

Users subscribe to an online accounting software solution and move their books to the cloud. From then on, they can access their accounts from any web browser, or from an app on their phone. Most users connect the software to their business bank account, so that banking transactions flow automatically from the bank to the books. This saves them from a lot of data entry.

Benefits of cloud accounting software

♦ Running your business accounts online has many advantages.

♦ Data about your sales or income and purchases can flow straight from your bank to your books so you don’t spend hours transcribing them.

♦ You can see your current financial position at any time.

♦ Multi-user access makes it easy to collaborate online with your team and advisors.

♦ It’s online software so there’s nothing to install or update, and all your data is backed up automatically.

♦ You can set up a dashboard showing important financial information like who owes you money, what bills are due, and how your cash flow is looking.

Accounting software shouldn’t be a chore to use

Small business accounting software that’s not available via the cloud can be tedious. It requires a lot of manual data entry and can suck up far too much of your time and effort. This doesn’t add value, and takes the fun out of being in business. Cloud software can save your company time and money.

Problems with traditional accounting software

♦ The data in the system isn’t always up to date.

♦ It only works on one computer and data gets moved from place to place, for example, on a USB drive. This is not secure or reliable.

♦ Only one person has user access. Key people can’t access financial and customer details.

♦ It’s costly and complicated to keep backups (if they’re done at all).

♦ It’s expensive, difficult and time-consuming to upgrade compared to cloud accounting software, which updates automatically.

Why the cloud and accounting software are the perfect match

You can use cloud-based software from any device with an internet connection. Online accounting software keeps small business owners connected to their data and their accountants. The software can integrate with a whole ecosystem of third-party business apps. It’s scalable, cost-effective and easy to use.

In the cloud, there’s no need to install and run applications over a desktop computer. Instead, you pay for the software by monthly subscription.

Cloud security is world-class

As a small business owner, you might be concerned about a cloud service provider storing your data. But the cloud is one of the most secure ways to store information. For example, using cloud software, if your laptop is stolen, no one can access your data unless they have a login to the online account. With cloud software, your data lives online on secure servers – as opposed to on your hard drive.

In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off-site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.

In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.

Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already primed to use cloud accounting.

Work smarter with accessible data in the cloud

The beauty of online accounting software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.

Software updates can be developed and delivered faster and more easily in the cloud. This means you don’t need to worry about installing the latest version and you’ll get access to new features instantly. With cloud accounting software, you have the option to run your business remotely, from anywhere in the world. And when data is fluid and accessible, the possibilities are endless.

Source: Xero Resources

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Digital accounting refers to the formation, representation and transmission of financial data in an electronic format.  Computers and accounting software have transformed the financial industry.  Technology advancements have enhanced the accountant’s ability to interpret and report data faster, more efficiently and more effectively than ever before.

The greatest benefits of the digital age to productivity can be organized into four main categories.  They are E-Business, Cloud Computing, Enterprise Resource Planning (ERP) Systems and Digital Technology Advancements.

E-Business

Electronic business processes allow team members to coordinate activities for internal management and combine the client’s information with a financial professional’s data via the use of digital networks.  Enterprise applications can be shared via internal and external networks called Intranets and Extranets.  The use of these technologies distributes information through a single point of access such as a Web interface using the highest level of encryption security standards available.

Cloud Computing

Software-as-a-service (Saas) provides the core of the cloud computing experience.  More and more companies are creating custom platforms to facilitate the access of data via all kinds of mobile devices.  The ability to access information at anytime from anywhere is now imperative.

Enterprise Resource Planning (ERP)

ERP systems are software programs that bring different departments in an organization into the same collaborative environment.  They make information available from diverse groups and support activities from multiple locations.

Data is accessed through a central database and shared from different functions such as accounting, finance, marketing, human resources and manufacturing.  ERP improves business performance by allowing management to get a full three-hundred-sixty-degree view of how a business is performing in real-time.  This is a huge advantage in the ability to make major business decisions with increased accuracy, reliability and speed.

Digital Technology Advancements

The nature of digital accounting systems are characterized by easily accessible and retrievable data through the utilization of integrated systems, real-time reporting and ongoing development.

New technologies in digital accounting are designed to fulfill an overwhelming pressure for “data on demand.”  Smartphones, Apps and Social Media are the primary conduits for this process.  Constant advancements allow financial professionals to spend more time advising clients and assisting them in developing strategies than simply generating financial reports.

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Lisa Ngan and Pete Teo – an architect and a musician/filmmaker respectively – gave up their city lives in Kuala Lumpur to run an organic farm and farm-to-table restaurant, A Little Farm on the Hill in Pahang, Malaysia. Unlike traditional farms, technology is at the heart of their business operations. This is one of the many examples of customer stories with Xero Accounting Software.

Xero supports businesses like this and more. Whether you are an SME starting a new business or an established organization looking to enhance your business activities with technologies. Cloud accounting software such as Xero allows you to see your cash flow in real-time while invoicing, payroll, billing & banking online can be performed easily. Together with an ecosystem of apps, Xero provides solutions to align your growing business needs. No matter what business you’re in, Xero can help you.

As Xero Gold Partner, we can elevate your business operations. Feel free to get in touch with us, send us a message, and let us guide you.

To see more customer stories with Xero, please visit Xero TV.

Video Source: Xero 

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